Baltic Dry Index

This is an index issued daily by the London Stock Exchange. It directly measure the demand for shipping capacity versus the supply of dry bulk carriers. The supply of cargo ships are quite tight as it takes a lot of time to commission a ship. It is more costly to park a ship for some parts of the time. So marginal increase in the demand can push the index quite high.

The BDI is a practical economic indicator on a global scale. THe BDi is also a measure for what it costs to ship raw materials like iron, steel etc. The index is calculated by calling ship brokers around the world to see what the prices are for 22 different routes around the world. Ships are divided based on their capacity.

  • Capemax (10 percent of the global fleet): ships that can carry 100,000+ dead weight tons of cargo and are too big to pass through the Panama Canal

  • Panamax (19 percent of the global fleet): ships that can carry 60,000-80,000 dead weight tons of cargo and can barely fit through the Panama Canal

  • Handymax, or Supramax (37 percent of the global fleet): ships that can carry 45,000-59,000 dead weight tons of cargo

  • Handysize (34 percent of the global fleet): ships that can carry 15,000-35,000 dead weight tons of cargo

BDI is a very visible indicator of demand for materials and commodities globally. It is a simple index and is difficult to manipulate. Since the index is directly calculated from prices around the world it is driven by supply and demand, it is shielded from the involvement of government, speculators and other key players. BDI usually goes up when the economies around the world are growing, the demand and there in the prices of commodities grow, companies and stock prices around the world continue to increase in value

Reference

Baltic Dry Index

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